We have studied the response of ferromagnetic liquid crystals to external magnetic and electric fields, and compared it to the usual response of nematic liquid crystals (NLCs). We have observed effects, which are not present in a pure NLC and are a consequence of the coupling between the nematic director and the magnetization. The electro-optic effect, which is in the ferromagnetic phase the same as in the pure NLC, is accompanied by a converse magnetoelectric effect. The magneto-optic effect differs completely from the one observed in the pure NLC, where it is a quadratic effect and it only appears when a magnetic field larger than a critical field is applied perpendicular to the director. In the ferromagnetic NLC in addition to the response to the perpendicular field, there is also a qualitatively different response to the parallel field. Contrary to the pure NLC no critical field needs to be exceeded for the system to respond to a perpendicular field, but a critical field needs to be exceeded to observe a response to the field parallel to the director and antiparallel to the magnetization. The critical field is in this case two orders of magnitude smaller than the critical field of the magnetic Frederiks transition in the pure NLC. The experimental observations are well described by a simple macroscopic theory.