I feel like I’ve gone crazy. Did the classic app have this option and the new version removed it? How do I get SmartThings to enable recording on the alarm condition? I’ve tried everything (IFTTT, Arlo, and SmartThings). I just want my cameras to record when an alarm is triggered!
Smart home monitor in the new app is a completely separate feature from the one in the classic app – – they just happen to have the same name. 
And, yes, the feature you describe can only be used with SHM in the classic app. It is not available with SHM in the new app.
https://support.smartthings.com/hc/en-us/articles/209529506-How-to-connect-Netgear-Arlo-Cameras
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that’s disappointing.
I haven’t paid much attention to the new app yet. Maybe they just haven’t put everything in it yet?
They are continuing to add some of the missing features, but it also appears that some will never be added as they are “streamlining” the new app.
For example, support told one community member that using the audio sensor from a camera will not be added to the new app—they expect you to use the camera’s own app, which rather misses the point.
They also don’t seem to have any plans to add back the missing lock functionality.
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