Proper English would be "all the students told me that their teacher WAS very smart". Sequence of tenses is not easy but the only right thing.
For British etc speakers of English 'smart' is not so much used - at least not in quite that sense. Probably also need to allow of in a sentence like:
"All of the students told me that their teacher is very intelligent"
How about "clever"?
It's good - that would work well too
How about "wise"?
I wrote "their teacher was very smart" because the "telling" was in the past. That seems to me to convey the same meaning even though it's less literal.
"all the students said to me that their teacher was very wise, "was not accepted. That is a perfectly normal sentence in English. Admittedly , "told me their teacher" would be more common as more succinct.