So Brian is pretty much spot on. The simplest way to view it is that Smarttings has no concept of mode but views the cameras as either on our off. With the cameras on you can detect audio or motion. Arlo has modes and gives you a few basic modes you can setup. You can also configure more advanced modes with custom rules if needed. The problem is that since they both operate independently they can step on each other toes, kind of like you are talking about. I don’t understand why it is changing your mode though, but i also never used the original modes once i setup the integration. What I observed where things like Smarrthings changing setting on the mode. Generally around notification, and how to record. That is the reason why for a long time I tried to set the cameras in the Arlo Cloud and then never touch them from Smartthings.
The only official way to control the cameras in Smartthings is with SHM, but simply triggering a recording is only part of the problem. There are also all the settings that are associated with that mode. There is also the fact that SHM has 2 different versions with different feature sets. There is the version that installs and runs from the classic app which has the features Brain mentions above and then there is the one that installs from the new Smarttthings app that does not. Then there is the fact SHM is not available to all users
This is why Arlo Assistant which tries to emulate Arlo Modes in Smartthings has come about. There was an app that actually allowed you to control the Arlo Mode from Smartthings, but that recently was permanently broke by Samsung/Smartthing/Arlo. What Arlo assistant attempts to do is allow you to create the modes in Smarrthings based on your location conditions. Once you tell it what the condition is you can effectively create the rules around what will trigger it and then what it will do, and who to notify. What I was trying to do was emulate what the Arlo Cloud allows you to do.
My personal example is that I have Arlo Assistant setup to do different things with the arlo cameras based on the ADT Smartthings Alarm Panel State. Simply put while my alarm panel is in disarmed or Armed/State the camera will just record, or my front door will notify with a text message. If the Alarm panel is in Armed/Away I will have it trigger recordings on all of the cameras and notify.
The biggest downside to Arlo Assistant is that it is in flux. I just started on it a little while ago and simply put still figuring some things out, but it is certainly very functional for what it was intended to do.
The biggest thing i would caution you on is try to do your changes in one place or the other. If you don’t they will step on each others toes. If you decide to try out Arlo Assistant to meet your needs let me know if you have any issues and i will see what i can do to rectify the issue.
I would also say that simply put there is no right or wrong way to manage the cameras. Largely because each of them have their quirks and benefits, you just need to find the way that works for you.