You don't have to start over. You can convert from one to another with an existing library (I've done both ways).
Under the File menu, you can select Relocate Masters to move managed file somewhere else as referenced files, or you can select Consolidate Masters to move or copy referenced files into the library as managed files.
Personally I prefer using referenced files. I tried managed files before and when my library grew to over 200GBs I had problems trying to restore from a Vault when I got a new MBP. I ended up having to go to my old MBP and Relocating masters for all my projects, and then moving the much smaller library to my new MBP. It turns out I would have needed over 400GBs of free disk space to restore a 200GB Vault. That's a really bad design flaw and the reason I'll never use managed files again.