We know the passage well:
Jesus answered him, “Truly, truly, I say to you, unless one is born again he cannot see the kingdom of God.” Nicodemus said to him, “How can a man be born when he is old? Can he enter a second time into his mother’s womb and be born?” Jesus answered, “Truly, truly, I say to you, unless one is born of water and the Spirit, he cannot enter the kingdom of God. That which is born of the flesh is flesh, and that which is born of the Spirit is spirit. Do not marvel that I said to you, ‘You must be born again.’ The wind blows where it wishes, and you hear its sound, but you do not know where it comes from or where it goes. So it is with everyone who is born of the Spirit” (John 3.3-8).
What is interesting is that this was not a message reserved for an inquiring Pharisee. Jesus gave the same message to his committed disciples.
At that time the disciples came to Jesus, saying, “Who is the greatest in the kingdom of heaven?” And calling to him a child, he put him in the midst of them and said, “Truly, I say to you, unless you turn and become like children, you will never enter the kingdom of heaven” (Matthew 18.1-3).
Here “turn” in the ESV is a more literal translation of what is rendered “are converted” in the NASB and the KJV. What seems obvious to me, but I don’t remember ever seeing discussed anywhere, is that these two exhortations are substantially similar. Jesus tells the disciples who have been following him for years and a secretly inquiring Pharisee the same thing.
I’ve heard pastors claim that none of the disciples were regenerate until late in Jesus’ ministry, perhaps even after his resurrection. I don’t believe that. It strikes me as the same sort of mistake as viewing Genesis 15.6 as a record of Abram’s conversion, when Hebrews 11 is quite plain that Abram was a believer at least from the time of Genesis 12.1-3. The disciples were following Jesus as much as Abraham had and yet they needed to become like little children in order to enter the Kingdom of God. (True, Judas never had the same faith as Abram, but that was only revealed by the way he responded to Christ’s ongoing exhortations.)
A couple of stories from Acts might also be relevant here. In Acts 10.1-4 we have the introduction to the story of the gospel being preached to the Gentiles:
At Caesarea there was a man named Cornelius, a centurion of what was known as the Italian Cohort, a devout man who feared God with all his household, gave alms generously to the people, and prayed continually to God. About the ninth hour of the day he saw clearly in a vision an angel of God come in and say to him, “Cornelius.” And he stared at him in terror and said, “What is it, Lord?” And he said to him, “Your prayers and your alms have ascended as a memorial before God.
Obviously, Cornelius is already regenerate and justified as we define those terms in our theological parlance. As Francis Turretin observes:
Although a Gentile by birth, Cornelius was yet a proselyte by religion. Although he could not believe that the Messiah had come and was that Jesus whom Peter preached, yet he could believe with the Jews from the oracles of the prophets that he would come. Thus he is not to be reckoned among the Gentiles, but among the patriarchs who looked for salvation from a Redeemer nor yet manifested. Hence by the advent of Peter, he did not receive a beginning, but an increase of faith.
We find the same thing in the case of Lydia,
And on the Sabbath day we went outside the gate to the riverside, where we supposed there was a place of prayer, and we sat down and spoke to the women who had come together. One who heard us was a woman named Lydia, from the city of Thyatira, a seller of purple goods, who was a worshiper of God. The Lord opened her heart to pay attention to what was said by Paul. And after she was baptized, and her household as well, she urged us, saying, “If you have judged me to be faithful to the Lord, come to my house and stay.” And she prevailed upon us (Acts 16.13-15).
Lydia was, according to our theological definitions gleaned from the Bible as a whole, regenerate and justified before she ever met Paul. Paul worshiped with her because they worshiped the same God. God’s opening of her heart I think proves the necessity and reality of God’s effectual call by analogy and a forteriori argument, but the event shows first that even regenerate, justified, persons only pursue holiness and “increase of faith” by the Spirit’s monergistic work.
And these faithful, God-fearers do have to turn, change, repent, convert in response to the preaching of the Gospel. You would think their maturity would count for more and perhaps in some ways it did count. But they had to be babies again no matter how long they had learned the Scriptures. They had to leave everything they knew and follow God in a new direction. And one of the challenges to humility must have been this: they had to enter the Kingdom in the same way a a convert from paganism. Both faithful synagogue worshipers who were “righteous before God, walking blamelessly in all the commandments and statutes of the Lord” (Luke 1.6) and Joe Pagan with his gods and goddesses, prostitutes and thievery, got in the same way. Both had to be baptized as if they came in on the same footing. One in Christ.
It is interesting. In both sorts of preaching we do see God’s antecedent grace affirmed. The angel told Cornelius that his life of faith was now being blessed with the fulfillment of the promises he had been hoping in. The Apostles preach to the Israelites that God’s grace to them is now being realized in the fulfillment of promises. But the pagans too are told that they have received grace (albeit common grace which would not result in personal salvation from God’s ultimate judgment). Acts 14 affirms God is close and in Acts 17 we find that, in addition to Israel’s special status as God’s son, all people are in a general sense God’s offspring. Because God has alway been (to a varying extent, whether special or common) gracious to them, they need to trust God now in his ultimate act of love and faithfulness through Jesus.
This seems to be the case even within the Church of the New Covenant. It is past grace and the certainty of it which gives one the privelige and duty of repenting of sin and endeavoring after new obedience.
“For just as the body is one and has many members, and all the members of the body, though many, are one body, so it is with Christ. For in one Spirit we were all baptized into one body—Jews or Greeks, slaves  or free—and all were made to drink of one Spirit” (1 Cor 12.12, 13). “Now you are the body of Christ and individually members of it” (12.27). “You cannot drink the cup of the Lord and the cup of demons. You cannot partake of the table of the Lord and the table of demons. Shall we provoke the Lord to jealousy? Are we stronger than he?” (10.21, 22). And again: “Do you not know that your bodies are members of Christ? Shall I then take the members of Christ and make them members of a prostitute? Never! Or do you not know that he who is joined to a prostitute becomes one body with her? For, as it is written, “The two will become one flesh.” But he who is joined to the Lord becomes one spirit with him. Flee from sexual immorality. Every other sin a person commits is outside the body, but the sexually immoral person sins against his own body. Or do you not know that your body is a temple of the Holy Spirit within you, whom you have from God? You are not your own, for you were bought with a price. So glorify God in your body” (1 Cor 6.15-20).
In some quarters we might expect Paul to question these prostitute-hiring professing believers whether they had actually been united to Christ. “If your body were really a Temple for the Spirit, then you wouldn’t be engaged in this sin.” But that’s not what he says. According to Paul’s reasoning, to deny the Corinthians had received grace and the Spirit and incorporation into Christ would undercut his entire exhortation for them to repent.
This dynamic is found all over Paul’s epistles. While the circumstances of the exhortations are quite different, it seems to have some parallele to Matthew 18.1-3. The disciples were following Jesus. They had received grace. But they had to keep following. They had to become like little children. Judas refused.
Put to death therefore what is earthly in you: sexual immorality, impurity, passion, evil desire, and covetousness, which is idolatry. On account of these the wrath of God is coming. In these you too once walked, when you were living in them. But now you must put them all away: anger, wrath, malice, slander, and obscene talk from your mouth. Do not lie to one another, seeing that you have put off the old man [anthropos = Adam] with its practices and have put on the new man [anthropos = Adam], which is being renewed in knowledge after the image of its creator. Here there is not Greek and Jew, circumcised and uncircumcised, barbarian, Scythian, slave, free; but Christ is all, and in all. Put on then, as God’s chosen ones, holy and beloved, compassion, kindness, humility, meekness, and patience, bearing with one another and, if one has a complaint against another, forgiving each other; as the Lord has forgiven you, so you also must forgive. And above all these put on love, which binds everything together in perfect harmony. And let the peace of Christ rule in your hearts, to which indeed you were called in one body. And be thankful.
Or to summarize from Second Corinthians 6.1: “Working together with him, then, we appeal to you not to receive the grace of God in vain.”
Even though the Colossians have already in some sense been transferred from one Adam to another, they are called to continue further in what they have. In fact, Paul has no problem describing what they must do as what has already happened to Christians. For example:
The night is far gone; the day is at hand. So then let us cast off the works of darkness and put on the armor of light. Let us walk properly as in the daytime, not in orgies and drunkenness, not in sexual immorality and sensuality, not in quarreling and jealousy. But put on the Lord Jesus Christ, and make no provision for the flesh, to gratify its desires (Romans 13.12-14; bold added).
Telling someone to put on Christ is not necessarily a denial that they have already been clothed in Christ. Nor does confidence that they have been clothed on Christ in any way weaken the necessity that they put on Christ.
One of the best Reformed expositions of this dynamic is The Free Offer of the Gospel by John Murray, though one should also consult his essay on common grace. Murray is dealing with the evangelism of unbelievers (though his texts in many cases also deal with the recipients of covenant grace) and shows that confidence in God grace does not undercut the Gospel call to repent and believe, but establishes it.
Thus, anyone who says that being in covenant makes them immune to exhortations to repent and believe simply doesn’t understand what it means to be in covenant. The dynamic of law and gospel (however much that terminology is misleading regarding the Old and New Testaments) is still firmly in place.