Yes, "Reset Adventures" is your button as it has been stated above.
1. Start the game.
2. Enter the nearest town. You cannot reset adventures from the wilderness or from a dungeon.
3. Open the "Game Options" menu and click the button. Confirm the action by clicking "Yes".
4. Now, the game is reset. All your characters are in the Valeia Inn. If it wasn't Valeia, where you reset the game from, you are in another town and get "entry forbidden" sign when you highlight anything in the current town. Click "Valeia" button.
5. All your characters are sitting in the inn. You can delete them if you want - but do not do it now. You can inherit some equipment from them before deleting them if you want - but do not do that in the inn. Take one character out, listen to Gareth, return to the inn and take the needed characters out. Trade the equipment outside the inn.
6. Do not forget to "rewrite" your money in the bank to some character which will not be deleted
Otherwise, you will lose the account. Now, it's time to delete unwanted characters and create new ones.
Notes:
1. It does not matter where your characters are in the moment of resetting adventures. They do not need to be in the same inn. Some of them can be in Valeia, others can be in Ishad N'Ha, etc. The only condition is that each of them is in some inn.
2. You do not lose ALL quest items
For example, you do not lose Ardibren Keepsake, Assassin's Dagger, Orb of Clarity, Strumbold's Helm, No-Dachi of the Stone, Gosh'Hin's shield and some others. On the other hand, you lose Algamesh' Amulet, Monkey Idols, Collaseum Gems, Ardibren's Journal, Genie Lamp, Evil Elements and some others.